Ciena: An Always-Volatile Play On Telecom And Data Center Spending
Stephen Simpson, CFA
Stephen Simpson, CFA
Ever-Volatile Ciena Doing Well In 100G
Stephen Simpson, CFA
Stephen Simpson, CFA
Ciena Goes Back Into The Penalty Box
Stephen Simpson, CFA
Stephen Simpson, CFA
Thu, Jun. 2, 3:00 PM
Thu, Jun. 2, 10:13 AM
- Ciena (NYSE:CIEN) is up 11.9% out of the open after fiscal Q2 results where profits declined less than expected and revenue gains in Asia Pacific made up for Western declines.
- On a GAAP basis, net income fell 32%, while non-GAAP net income swelled slightly to $52.4M. Non-GAAP EPS fell to $0.34 from a year-ago $0.35.
- Gross margin rose to 44.2% from a year-ago 43.8% and the previous quarter's 43.9%.
- Revenue by segment: Networking platforms, $512.2M (up 1.9%); Software and Software-related services, $30.5M (up 27.6%); Global services, $98M (up 3.2%).
- By region: North America, $395.5M (down 0.4%); Europe, Middle East and Africa, $96.2M (down 5.9%); Caribbean and Latin America, $57.9M (up 20.9%); Asia Pacific, $91.1M (up 22.6%).
- For its Q3, the company is guiding to revenues of $655M-$685M (in line with expectations) along with gross margin in the mid-40s and opex of about $225M.
- Press Release
Thu, Jun. 2, 9:15 AM
Thu, Jun. 2, 7:04 AM
Wed, Jun. 1, 5:30 PM
Wed, Apr. 27, 5:41 PM
- Infinera (NASDAQ:INFN) has guided on its Q1 call for Q2 revenue of $255M (+/- $5M) and EPS of $0.17 (+/- $0.02), below consensus estimates of $272.2M and $0.22.
- The optical transport hardware vendor reports seeing "spending lumpiness" and uncertain investment timings among some clients. Rival Ciena (NYSE:CIEN) issued soft guidance in March, while blaming macro pressures and EMEA weakness. Juniper and Ericsson, which also have strong telecom capex exposure, have provided disappointing numbers this month.
- Infinera is now down 15.2% after hours to $13.20, after initially falling moderately in the wake of its mixed Q1 results. Ciena, which often goes in the same direction as Infinera, hasn't yet traded after hours since Infinera issued its guidance.
Tue, Mar. 22, 3:08 PM
- Infinera (INFN -6.7%) is off sharply after Microsoft (the world's #2 public cloud service provider) stated at the optical networking industry's annual OFC conference it prefers short-reach data center interconnect (DCI) modules that are built directly into Ethernet switches, rather than standalone DCI systems such as Infinera's Cloud Xpress.
- Microsoft's remarks came as chipmaker Inphi (IPHI +4.4%) unveiled a silicon photonics-based 100G transceiver for 80km DCI modules. Microsoft worked with Inphi to develop the solution, and provided a positive quote for Inphi's PR: "The ability to provide high bandwidth connectivity in a form factor that is smaller, uses less power and is less expensive than today's solutions is a benefit to Microsoft and the cloud market in general."
- Cloud Xpress has been expected to be a major growth driver for Infinera in the coming years, as major Web/cloud service providers continue rapidly building out their data center infrastructures. Infinera stated on its Q4 call (transcript) it had 20 Cloud Xpress invoice customers at the end of 2015, including "a number" of large Internet firms.
- While Infinera sells off, Ciena (CIEN +3.4%), which derives a large % of its sales from packet-optical systems that integrate Ethernet switching and optical transport functions, is rallying. Ciena entered the standalone DCI market last year through its Waveserver platform.
- MKM is defending Infinera, arguing today's selloff is an overreaction and that the Microsoft news was mostly priced in.
Thu, Mar. 3, 12:53 PM
Thu, Mar. 3, 10:34 AM
- In addition to missing FQ1 sales estimates (while beating on EPS), Ciena (CIEN -20.6%) is guiding for FQ2 revenue of $615M-$645M, mostly below a $644.6M consensus. The company also used its earnings call to lower its FY16 (ends Oct. '16) revenue growth guidance to 5-8% from 8%-9%; consensus is for 8.4% growth.
- Fellow optical networking hardware firms Infinera (INFN -4.7%) and Adtran (ADTN -2.5%) are also lower. As are optical component firms NeoPhotonics (NPTN -9%), Fabrinet (FN -2.4%), Oclaro (OCLR -3.1%), and Lumentum (LITE -2.1%). NeoPhotonics jumped yesterday in response to strong earnings/guidance; Fabrinet and Oclaro did the same in February.
- Ciena reports seeing "some recent volatility in the broader macroeconomic environment." On the call, the company mentioned its EMEA sales are soft, and that it's making changes to deal with the issue.A strong dollar is also cited as a headwind. Ciena nonetheless expects to post above-market growth outside of EMEA.
- Ciena's top-line performance: Networking platforms revenue (packet-optical systems, optical transport systems, and Ethernet switches) rose 9% Y/Y in FQ1 to $449.5M. Software and software-related service revenue (inc. the Blue Planet SDN platform) rose 8% to $25.4M. Global services revenue rose 7% to $98.2M. One customer (AT&T?) accounted for 22% of revenue, and the U.S. overall accounted for 63.7% of revenue.
- Financials: Adjusted gross margin was 44.7% vs. 44.9% in FQ4 and 44.1% a year ago; GM is expected to be in the mid-40s once again in FQ2. Controlled spending helped adjusted op. margin rise 150 bps Y/Y to 8.3%. Ciena ended FQ1 with $995M in cash and $1.26B in long-term debt.
- JPMorgan is defending Ciena: The firm considers the FY16 revenue guidance cut reasonable given macro pressures, and thinks shares don't deserve to sell off more than a few percent. (source: Notable Calls)
- Ciena's FQ1 results, earnings release
Thu, Mar. 3, 9:15 AM
Thu, Mar. 3, 7:02 AM
Wed, Mar. 2, 5:30 PM
Wed, Feb. 3, 1:32 PM
- Though the Nasdaq is down 1.5%, many telecom equipment and optical component firms are rallying after network test equipment/telecom software provider Viavi (VIAV +17.6%) and optical component vendor Oclaro (OCLR +11.4%) beat calendar Q4 estimates and issued strong Q1 guidance.
- The list includes optical networking hardware firms Ciena (CIEN +3.9%) and Infinera (INFN +4.9%), component vendors Finisar (FNSR +5.3%) and Alliance Fiber (AFOP +2.2%), Wi-Fi hardware provider Ruckus (RKUS +3.5%), and VoIP and 4G signaling hardware/software firm Sonus (SONS +2.5%).
- Component maker NeoPhotonics (NPTN +14.7%) is posting double-digit gains, aided by an upgrade to Strong Buy from Raymond James. RJ says its checks point to strong sales fueled by Chinese demand and 100G metro optical buildouts.
- Oclaro guided for calendar Q1 (FQ3) revenue of $97M-$100M, soundly above a $90M consensus. The FQ2 beat was fueled by a 21% Y/Y increase in 100G product sales (53% of total revenue), which offset a 7% drop in sales of 10G and lower-speed products (35% of revenue). (earnings release)
- Viavi's beat was aided by a 5.7% Y/Y sales increase for the company's core network enablement (test instrument) business. The unit delivered Y/Y sales growth for the first time in five quarters. (earnings release)
- Viavi and Oclaro's numbers came shortly after optical component contract manufacturer Fabrinet soared in response to an FQ2 beat and strong FQ3 guidance. Fabrinet's revenue from 100G programs nearly tripled Y/Y in FQ2.
Tue, Jan. 12, 10:42 AM
- Believing the company is undervalued relative to peers and that its recent selloff spells a buying opportunity, Morgan Stanley's James Faucette has upgraded Ciena (NYSE:CIEN) to Overweight. His target has been cut by $2 to $23.
- Faucette: "Many 100G metro builds are set to kick-off in 2016, with major investment lasting into 2018. We would expect Ciena's revenue and EPS growth to accelerate as this upgrade gains strength...with the macro concerns that have sent the stock down an additional 10 percent since January 1st, we now think that the stock is attractive."
- He adds improved operational efficiency could also boost Ciena's bottom line. High customer concentration - AT&T and Verizon have long accounted for a major % of sales - is seen as a risk.
- Jefferies upgraded Ciena on Dec. 21, while citing a reasonable valuation and several top-line catalysts. Shares nosedived on Dec. 10 in response to the soft FQ1/FY16 guidance accompanying Ciena's FQ4 beat.
Dec. 30, 2015, 5:43 PM
- Though a fan of optical networking hardware vendors Ciena (NYSE:CIEN), Infinera (NASDAQ:INFN), and Xtera (NASDAQ:XCOM), Needham's Alex Henderson thinks many component makers have more 2016 upside. "We see more upside to revenues, better margin leverage, and more room for valuation improvements with the component names. We point out the current supply constraints on broad classes of Optical components at the end of CY15, which we expect to persist through CY16."
- He sees 2016 as a good year for optical, and 2017/2018 even better ones. "The driver of this should be the continuing strong growth in the [data center interconnect] market and the substantial ramp-up of the Metro Core Market. We strongly believe CY16 is the beginning of the Metro 100G/200G cycle, which should last through CY2020."
- Lumentum (NASDAQ:LITE), formerly JDS Uniphase's component arm, is one of Henderson's favorites. "LITE has roughly 50% of its optical product line in sold- out conditions well into CY16. The Industrial laser business is also likely to accelerate ... [supply constraints] reflect strong demand across numerous segments ... including Long-Haul and [data center interconnect] with Coherent modulators, Metro with ROADMs, and Access Metro with the T-XFP 10G transceivers. LITE is currently trading at 13x [enterprise value/EPS] on CY16 estimates and just 1.1x [enterprise value/sales]."
- He also likes Fabrinet (NYSE:FN), citing a valuation of 0.7x EV/sales and 9x EV/EPS, and Oclaro (NASDAQ:OCLR). “[T]he primary reason we are recommending [Oclaro] is the ACO 100G Coherent pluggable [transceiver]. Oclaro is first to market in this emerging category and if they ramp production smoothly we think they can sell whatever they can produce.”
- Looking at networking hardware firms, Henderson likes data center switch vendor Arista (NYSE:ANET) and networking visibility/monitoring hardware firm Gigamon (NYSE:GIMO). Arista is expected to benefit from 25G Ethernet adoption and the rollout of Broadcom's Jericho switching chip, which contains a 720Gbps packet processor and will allow Arista's gear to support edge routing functionality at much lower costs than rivals (read: Cisco). "We think Arista could pick up 3-5 points of market share, which we calculate could drive over 30% top-line growth."
- Regarding Gigamon: "After a strong year in CY15, Gigamon is likely to produce a more 'normalized' year with growth in the 20% plus vicinity against tough comps with a gradual upward bias to Gross Margins driven by increasing security-driven transactions."
Dec. 21, 2015, 9:18 AM
- Believing shares are reasonably priced at 11.4x estimated calendar 2017 EPS, Jefferies' George Notter has upgraded Ciena (NYSE:CIEN) to Buy, and hiked his target by $2.50 to $25.
- Notter thinks Ciena, hammered two weeks ago due to its FQ1/FY16 guidance, is on track to hit its ~7% FY16 (ends Oct. '16) organic revenue growth target. He cites Verizon's 100G metro rollout, health long-haul/metro WDM market share at AT&T, renewed Comcast spending, and new project wins via Ciena's Ericsson alliance as catalysts. Beyond that, Notter expects last-mile fiber investments to drive higher spending on the optical transport networks servicing last-mile networks.
- CIEN +1.1% premarket to $20.02.
Ciena Corp. engages in the provision of network and communication infrastructure. It operates through the following segments: Converged Packet Optical, Packet Networking, Optical Transport and Software and Services. The Converged Packet Optical segment develops and sells optical processors,... More
Industry: Communication Equipment
Country: United States
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